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Product differentiation and duopoly: when social welfare benefits from cross-shareholding

  • Luciano Fanti

The present paper analyses the effects on social welfare of a partial crossparticipation at ownership level in a differentiated Cournot duopoly. We show that cross-participation, despite the fact it appears as an anti-competitive practice which reduces the degree of market competition, may increase social welfare when the products are complements between them, and, moreover, not only profit but also consumer’s welfare is enhanced. Therefore, the policy implication is that in industries characterised by product complementarity larger cross-participations at ownership level should be allowed, despite their anticompetitive nature.

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File URL: http://www.ec.unipi.it/documents/Ricerca/papers/2011-129.pdf
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Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/129.

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Date of creation: 11 Jan 2011
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Handle: RePEc:pie:dsedps:2011/129
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  1. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
  2. Philip M. Parker & Lars-Hendrik Roller, 1997. "Collusive Conduct in Duopolies: Multimarket Contact and Cross-Ownership in the Mobile Telephone Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 304-322, Summer.
  3. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 191-205, June.
  4. David Gilo & Yossi Moshe & Yossi Spiegel, 2006. "Partial cross ownership and tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 81-99, 03.
  5. Hiroshi Osano, 2011. "Partial Ownership and Strategic Alliances with Reallocation of Corporate Resources," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 202-223, June.
  6. Rupayan Pal, 2012. "How much should you own? Cross-ownership and privatization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-008, Indira Gandhi Institute of Development Research, Mumbai, India.
  7. Bárcena Ruiz, Juan Carlos & Olaizola Ortega, María Norma, 2004. "Cost-Saving production technologies and strategic delegation," IKERLANAK 2004-12, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  8. Häckner, Jonas, 1999. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Research Papers in Economics 1999:9, Stockholm University, Department of Economics.
  9. repec:ebl:ecbull:v:15:y:2007:i:6:p:1-8 is not listed on IDEAS
  10. Macho, I. & Verdier, T., 1989. "Strategic Managerial Incentives and Cross Ownership Structure: A Note," DELTA Working Papers 89-02, DELTA (Ecole normale supérieure).
  11. Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
  12. Trivieri, Francesco, 2007. "Does cross-ownership affect competition?: Evidence from the Italian banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(1), pages 79-101, February.
  13. Eirik S. Amundsen & Lars Bergman, 2002. "Will Cross-Ownership Re-Establish Market Power in the Nordic Power Market?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-95.
  14. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-22, September.
  15. repec:ebl:ecbull:eb-07o30001 is not listed on IDEAS
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